In fewer than 140 characters, Twitter Inc. broke the news Thursday on its own short-message service that it has filed confidential paperwork to begin the process for its highly anticipated public offering.

The Wall Street Journal's Deborah Kan speaks with Twitter CEO Dick Costolo about the power of 140 characters.

An IPO would mark a business milestone for seven-year-old Twitter, which is used by more than 200 million people and created a global online communication culture, but has yet to prove itself as a big and lasting business in the mold of
Google
Inc.
and
Facebook
Inc.

Since Twitter's filing was submitted to the Securities and Exchange Commission under a new law that allows small companies to keep their IPO documents private, Twitter didn't reveal how fast it is growing or whether it is profitable.

Goldman Sachs Group
Inc.
is the lead underwriter on the planned initial stock sale, people familiar with the matter said. One person familiar with the matter said other banks are expected to join Goldman in managing what is likely to be one of the highest-profile IPOs since Facebook went public in the spring of last year. A Twitter spokesman declined to comment.

Twitter has already achieved a valuation of more than $9 billion, as judged by private sales by employees of their stock to
BlackRock
Inc.
earlier this year, people familiar with that transaction have said. Such a valuation would still put Twitter well behind Facebook, which went public with a valuation of about $100 billion. After initially struggling, Facebook shares hit a new all-time high this week and now trade above their IPO price.

CLICK IMAGE for an interactive look at major moments in Twitter history. AP

"It's maybe a little earlier than some people suspected. A lot of people suspected first quarter of next year," said
Carter Mack,
president of JMP Group Inc., a San Francisco investment banking and asset management firm. "It's been a terrific IPO market for technology-related companies this year."

Under the direction of CEO Dick Costolo for the past three years, Twitter made it a priority to turn its popularity into an ad business. Through ads on its service dubbed "promoted tweets," the company is expected to take in $583 million in ad revenue this year, says EMarketer Inc.

"Twitter has already become the pulse of the world for breaking news and information," said
Josh Elman,
a former Twitter executive, who owns shares in the company and now is a partner with venture-capital firm Greylock Partners. "I am excited for the business that has been built to support that."

A driver of the secret manner and possibly the timing of Twitter's filing could be the Jumpstart Our Business Startups Act, or JOBS Act. An effort to spur corporate and economic growth in the wake of the financial crisis, the JOBS Act allowed for the first time some U.S. companies to initially file IPO paperwork confidentially, so that only regulators at the SEC can see it.

Only U.S. companies defined by the act as "emerging growth companies," which meet criteria including having less than $1 billion in revenues, can use confidential filings. The act also allows those that qualify for it less stringent disclosure requirements in areas including executive compensation, and enables them to quietly withdraw their filings if they don't find the demand they expect.

ENLARGE

From the Archive

What were the top Twitter stories of the year and who sent out the most retweeted message? WSJ's Monika Vosough went to Twitter's headquarters in San Francisco to find out what the social network's data says. (Photo: Getty Images)

Companies don't have to have make their public filing until at least 21 days before they launch a "roadshow," which is when they actively shop the IPO to investors and price the deal. The filing doesn't obligate Twitter to set a timeline for selling its shares.

If it goes public soon, Twitter could capitalize on a buoyant market and a hot period of new stock offerings. The U.S. IPO market is on track to produce almost 200 debuts this year, which would be the most since 2007, according to Dealogic. The IPOs have also performed well for investors, jumping an average of 13.1% in their first day of trading.

Twitter has raised more than $1 billion in private financing so far, including money used to cash out some early investors or employees. Twitter's stock buyers have included venture-capital investors Charles River Ventures, Benchmark, Insight Venture Partners,
Andreessen Horowitz
and Kleiner Perkins Caufield & Byers. Wealthy investors, including funds led by Russian billionaire
Yuri Milner,
and mutual-fund firm
T. Rowe Price Group
Inc.,
bought private Twitter shares more recently.

Twitter will have to prove to investors that its ad business is more than just promise. Many big marketers still treat Twitter more as an experiment than a cornerstone of efforts to lure shoppers into a store or to pull people to their websites.

Part of the advertiser reluctance is the size of Twitter, which draws smaller numbers than TV networks or Facebook. Advertisers also say Twitter options for advertisers are crude compared with Facebook's.

"The appeal for advertisers is more than the amount of revenue they're getting at the moment because they don't have very good products," said
Simon Mansell,
chief executive of digital-advertising firm TBG and a Twitter ad partner.

Questions also remain about whether Twitter's popularity will prove lasting. New digital services, such as photo-sharing app Instagram and messaging service Snapchat, have emerged to challenge Twitter.

Twitter's decision to tweet about its confidential IPO filing is perhaps fitting for a company that gave people a platform to broadcast private moments. The company quickly followed its IPO disclosure tweet with another: "Now, back to work," the company wrote, with a photo from Twitter offices of employees working at their desks.

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